JIS Services

The Government of Jamaica is introducing the accrual system of accounting in the public sector, which will allow for greater efficiency in the management of resources.
Presently, ministries and departments use the cash accounting system, which recognises transactions between the government and its clients only when the money is paid.
The accrual system of accounting however will recognise those transactions within the time period that they occur.
Referring to the country’s fiscal deficit, Deputy Financial Secretary, Robert Martin, told JIS News that outstanding tax revenues amounted to some $15 million and noted that if the accrual accounting system was in place, then those revenues would have been in the books of government up to the end of March 2004.
“Any outstanding expenditure would have been brought to book and recognised in the books of government and so you would have a proper picture of exactly where government is in terms of its assets and liabilities; its balance sheet and other financial statements,” Mr. Martin explained.
The Deputy Financial Secretary said that the government’s balance sheet might reflect a positive net worth if the accrual system of accounting was being used.
Explaining, Director of Systems for the Public Expenditure Policy Coordinating (PXPC) Division, Berome Edwards said the accrual system allowed government to determine the value of its fixed assets at any particular point in time.
The cash system accounts for fixed assets, such as buildings, motor vehicles and equipment at the time of their purchase or disposal but does not account for the value of those assets over time. He added that fixed assets such as buildings with a depreciable life of 25 years were written off as expenditure in the year of purchase.
The introduction of the accrual accounting system will begin on April 1 on a phased basis at the Ministries of Finance and Planning and Transport and Works. Public institutions, however, that were converted to Executive Agencies, have already adopted the accounting procedure as part of their new paradigm.
Both ministries will implement the change as part of a pilot project for six months before it is rolled out to other ministries over a ten-year period. A total of 80 accounting staff members in both ministries are being trained to carry out the new procedure using the software known as the Financial Management (FinMan) system.
The training will seek to change the culture and approach to business in government offices where bills are not accrued but are filed until funds are made available for settlement.
“In cash accounting, someone receives a bill for payment, they will keep that bill in the office and it wouldn’t be brought to book in the accounting system until the bill is paid. In the accrual system however, that unpaid bill is booked as expenditure in the accounts the moment it is received (and validated),” Mr. Edwards explained.
In response to the changes, the ministries, with the assistance of the Cabinet Office, have revamped job titles and job descriptions to match the adjustments in work procedures.
Additionally, the Institute of Chartered Accountants of Jamaica (ICAJ) will help to train persons in the new accounting procedure, while Fiscal Services Limited will provide technical assistance.
Head of the Information Technology Unit at the PXPC Division of the Finance Ministry, Joseph Manley said that the transition to accrual accounting involved a move from accounting software that was “after-the-fact accounting” to software that became more of a “management tool”.
He added that accrual accounting was critical to the concept of connective government as it was capable of treating government’s resources as a consolidated whole. “We intend to eventually, (perhaps in the next five to 10 years) come to a situation of consolidated national accounts through software where there is one database that covers all of government’s expenditure,” he said.
Consolidation will also be possible, as the accrual system will see a greater use of the Taxpayers Registration Number (TRN) in identifying clients.
Currently, with the exception of the Revenue Departments, a person or organisation doing business with several government agencies is assigned a different transaction number by each of those institutions. The use of the TRN for identity will help government to readily determine the quantum of business being undertaken with a particular client.
Mr. Manley said that the new software was currently being installed and that technical training would begin soon. He explained however, that the transition Management Information System (FMIS) and is capable of carrying out both cash and accrual accounting.
The move towards the use of accrual accounting in government is among measures outlined in Ministry Paper 56, titled Public Sector Modernisation; Vision and Strategy 2002 – 2012.